India’s manufacturing sector concludeed 2025 on a steady, though softer, growth trajectory as expansion in output and new orders lost some momentum amid competitive pressures and uneven demand across product categories. While overall business conditions continued to improve, the pace was the weakest in two years, reflecting slower gains in production, exports, hiring and input purchases, according to the HSBC India Manufacturing Purchasing Managers’ Index compiled by S&P Global.
The seasonally adjusted PMI eased to 55 in December from 56.6 in November, marking the least pronounced improvement in manufacturing health since late 2023, though the reading remained above its long-term average. New business inflows continued to rise sharply, but the rate of expansion was the weakest since December 2023. Output growth also softened, recording its slowest pace since October 2022.
Part of the deceleration in overall sales reflected a moderation in export demand. New export orders expanded at the slowest rate in 14 months, with manufacturers reporting that overseas demand was largely concentrated in Asia, Europe and the Middle East. Softer growth in new orders prompted firms to curb input acquireing, with the increase in purchasing activity easing to a two-year low.
Capacity pressures remained muted during the month, leading to only a marginal rise in factory employment. Job creation slowed to its weakest pace in the current growth phase that launched in March 2024. Outstanding business volumes edged higher, but the pace of backlog accumulation was minimal, indicating limited strain on production capacity.
Inventory trconcludes were mixed. Stocks of inputs rose sharply as firms sought to support production and manage supply necessarys, while finished goods inventories declined at one of the quickest rates in eight months as manufacturers drew down stock to meet current sales. The rise in input inventories was the least pronounced in two years, in line with softer purchasing activity.
Cost pressures remained subdued. Input prices increased at a relatively mild pace, driven by higher costs for materials such as bamboo, chemicals, glass, leather and packaging, but inflation stayed below long-run averages and among the lowest levels seen in 2025. Output price inflation also eased, falling to a nine-month low as manufacturers limited price increases.
Looking ahead, Indian manufacturers continued to expect higher output levels in 2026, although overall business confidence weakened to its lowest point in nearly three-and-a-half years. While firms cited advertising, favourable demand trconcludes and new product launches as supportive factors, concerns around competitive intensity and market uncertainty tempered sentiment
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